UPDATE 1-Coal to remain backbone of energy supply - IEA

Tue May 20, 2008 9:42am BST

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NICE France May 20 (Reuters) - Coal will remain the backbone of global energy supply for the next 25 years, Fatih Birol, chief economist of the International Energy Agency said on Tuesday.

Speaking at McCloskey's European conference in Nice, Birol said the growth of energy demand especially in China and India will mean coal is an essential fuel.

"There are two critical problems - energy security and climate change," Birol said.

"When I was in Davos in January the energy discussion was all about renewables, growth in MW. Soon after I was in Singapore and the discussion was all about coal and power generation, talked about in GW. It was like living on two different planets," he said.

"Governments need to understand better the realities of the markets when setting climate change targets and to invest in better technology," he said.

China and India need coal to fuel their power generation growth needed by their rapidly expanding populations, he said.

China and India have combined to create a new world energy order driven by their demand, Birol said.

If CO2 emissions targets are to be met, according to targets set by the G8, global energy efficiency must triple every year from the 1 pct improvement a year seen over the last 10 years, he said.

To meet emissions targets the world must only build, from 2013, coal or gas power plants with CCS (carbon capture and storage), renewables or nuclear plants, nothing else, he said.

"I personally believe it is very very very difficult given realities of the markets to reach these targets. Such big reductions in CO2 as leaders ask us to do is in contradiction to what is going on, especially on the research and technology side," he said.

"We cannot expand power generation and meet energy demand growth without coal. But climate change is the Achilles heel of the coal community," he said. (Reporting by Jackie Cowhig)

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